EurWORK European Observatory of Working Life

Major protests against cuts in unemployment assistance

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Country: 
Germany
Author: 
Heiner Dribbusch

In regular weekly demonstrations over July and August 2004, tens of thousands of people have taken to the streets in cities across Germany to protest against the so-called Hartz IV law. This legislation, which will come into effect in January 2005, will effectively abolish the current unemployment assistance by replacing it with a new so-called 'unemployment benefit II'. The new benefit will no longer be tied to the former income of the recipient but will be around the same flat-rate level as the current social assistance benefit.

In what have become regular weekly demonstrations, tens of thousands of people have taken to the streets in cities across Germany to protest against the 'Hartz IV' labour market reform law (Viertes Gesetz für moderne Dienstleistungen am Arbeitsmarkt) (DE0401205F) and especially against the introduction of a new 'unemployment benefit II' (Arbeitslosengeld II).

Unemployment assistance (Arbeitslosenhilfe), unlike unemployment benefit (Arbeitslosengeld), is financed not by social insurance contributions but by the federal government from general tax revenues. It is means-tested and currently amounts to 53% of previous net income or, if the recipient has a child, to 57%. However, with effect from 1 January 2005, unemployment assistance will be merged with the general social welfare assistance scheme (Sozialhilfe) to create 'unemployment benefit II', and thus effectively abolished in its current form. The new benefit will be no longer related to the former income of the recipients. Instead it will be fixed at the level of the current social welfare benefit which is EUR 345 per month in western Germany and EUR 311 in eastern Germany, plus additional payments for children and 'reasonable' costs for housing and heating. The new unemployment benefit II will apply to all recipients of the current unemployment assistance and all recipients of social welfare assistance who are considered fit to work. Both benefits require an eligibility test to determine whether the claimant is in need of financial assistance. This means test includes the income and assets of spouse or partner. Compared with current practice, the means test will be further tightened to include - amongst other points - private old-age pension provisions above a certain minimum.

The Federal Employment Agency (Bundesagentur für Arbeit, BA) reported that in July 2004 there were about 4.4 million registered unemployed people, of whom about 50% received unemployment assistance. At the same time BA reported only 300,000 registered vacancies.

The new protests were triggered by the fact that in July 2004 the BA sent out a 16-page questionnaire to the current recipients of unemployment assistance in order to test their eligibility for the new benefit. This made many people aware of the forthcoming law changes and raised fears among unemployed people that they could either lose their benefits or receive reduced payments. Others who are still in employment became aware of what they could lose if they became unemployed.

Demonstrations started at the end of July 2004 in a few cities in eastern Germany and since then have spread throughout Germany. The largest demonstrations have taken place in eastern Germany, where the unemployment rate in some areas is well over 20%, and where the new law is likely to hit hardest.

The federal government defended the new law, stating that it was necessary and pointed to the fact that the new provisions had been part of a major cross-party compromise on tax and labour market policy (DE0311101N) between the governing coalition of the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) and Alliance 90/The Greens (Bündnis 90/Die Grünen) and the main opposition parties - the Christian Democratic Union (Christlich Demokratische Union, CDU), Christian Social Union (Christlich Soziale Union, CSU) and the Free Democratic Party (Freie Demokratische Partei, FDP).

The federal government announced that it would provide public funds so as to be able to offer a fifth of long-term unemployed people a so-called 'one-euro job'. The Hartz IV law specifies that long-term unemployed people can be required to do work which is considered to be for the public good - such as work in public gardens or care for the elderly, and in return be paid an extra EUR 1 to EUR 2 per hour, which they can keep on top of their 'unemployment benefit II'. This provision, however, is currently the focus of much controversy. Whereas some charities have announced that they could provide several thousands of these jobs, there is concern - not only among trade unions - that this may lead to the loss of regular jobs in these sectors.

With regard to the protests, the Confederation of German Employers' Associations (Bundesvereinigung der Arbeitgeberverbände, BDA) has stated that it supports the Hartz IV law in principle, but accuses the government of 'false labelling'. It argues that the government should have been clearer right from the start about the fact that 'unemployment benefit II' is only a social welfare benefit for those in need and has nothing to do with national unemployment insurance.

The executive council of the Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB) has issued a statement in which it renews its criticism, in particular of the new legal provision that recipients of 'unemployment benefit II' will have to accept every legal job offered to them, regardless of whether or not the pay is based on or related to collectively agreed rates. The DGB executive declared that it would not to call on workers to participate in the demonstrations, especially if these protests were to be misused as a platform for party politics. However, regional organisations of DGB and some affiliated trade unions, such as the United Services Union (Vereinte Dienstleistungsgewerkschaft, ver.di), have continued to support the local demonstrations.